More than nine million people have to fill in a tax return for the 2009/2010 tax year. If you’re one of them, you have until 31 January to file online, or you’ll receive an automatic £100 fine. If you are self-employed, have a secondary source of income, are a company director, or have investment income or capital gains to declare, then you need to fill in a return. But there are plenty of ways to reduce what you owe.
If you use your own car for business (but not for actually getting to and from your place of work), then don’t forget to claim for your petrol costs. You can be paid up to 40p a mile by your company. But if they pay you less than that you can claim tax relief on the difference. For example, if you drive 5,000 miles a year for work, but only get 20p a mile from your boss, you can claim an extra £1,000 in tax relief – that’s worth £400 for a higher-rate taxpayer, says Ronnie Ludwig of Saffery Champness in The Sunday Times.
Self-employed people who work from home should also make sure they claim back all the relief available to help with various bills. You can claim relief for a proportion of the costs of heating, lighting, insurance, decorating and even cleaning.
Higher-rate taxpayers can also claim tax relief on charitable donations. GiftAid can be applied to donations to UK-registered charities – this allows the charity to reclaim basic-rate tax (currently 20%) on the sum. So if you donated £1,000, the charity would get £1,250. But if you pay 40% income tax, you can claim back a further 20% on the grossed-up donation. So in this case, you’d get 20% of the £1,250, which is £250 you can claim back.
Anyone who has invested in an Enterprise Investment Scheme (EIS) can claim back 20% tax relief (the same rate goes for higher-rate taxpayers) on their investment. These schemes encourage people to buy shares in qualifying small, unquoted companies. You can claim on investments of up to £500,000 each tax year, on condition that you hold the shares for at least three years. It’s an attractive relief, but be warned – these investments can be very risky. Also, don’t forget to register any capital losses you’ve made on selling shares or investment property, for example – you can carry them forward to offset against future taxable capital gains.
Finally, if you are finding your tax return particularly complicated to fill in, consider employing an accountant on a one-off basis; it shouldn’t cost more than £200-£300. You can find information on accountants at www.icaew.com/tax.